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Court: MTA Payroll Tax Unconstitutional

Transportation authority to appeal decision

The Metropolitan Transit Authority stands to lose about $1.5 billion in revenue per year after a New York State Supreme Court judge ruled on Wednesday, Aug. 22 that the MTA payroll tax is unconstitutional. The MTA plans to appeal the decision made by Judge R. Bruce Cozzens Jr., according to a released statement last week.

This didn’t stop local officials from calling the ruling a “win for taxpayers” during a press conference last Thursday. Nassau County Executive Edward P. Mangano, along with numerous members of local and state government, were out in full force to applaud the decision, and plead to the powers that be to not grant a successful MTA appeal.

Employers located within the downstate area served by the MTA, which runs New York City’s buses, subways, commuter railroads and some major bridges and tunnels, pay the tax. The MTA serves 8.5 million passengers a day, according to its website. Its current budget totals nearly $13 billion.

Nassau officials asserted that the state needed home rule messages from the municipalities or a two-thirds vote in both houses of the State Legislature, neither of which occurred.

“The MTA payroll tax is a special law, which does not serve a substantial state interest,” Cozzens Jr. wrote in the decision. Because the state did not seek a home rule message, “this was passed unconstitutionally.”

Mangano filed the lawsuit in 2010. This was after the cash-strapped agency was looking to close a $1.8 billion budget gap, according to the supreme court decision.

Governor David Paterson enacted the tax in 2009. It was eliminated for small businesses with payrolls under $1.25 million and private and public school districts earlier this year.

“Today, we gather to seek retroactive relief from this unconstitutional tax,” Mangano said. “This costly tax has stifled economic growth by chasing employers and job creators out of our region.”

Employers pay as much as 34 cents per $100 of salaries via the payroll tax, according to figures released. Cozzens did not order or direct the state to stop collecting the tax.

The MTA noted in a statement that four previous lawsuits challenging the constitutionality of the payroll tax had been dismissed. Of all the cases with similar arguments, this case is the first to reach the appeal level.

“We will vigorously appeal [the Aug. 22] ruling,” the statement read.

Without the payroll tax or another source of funding, “the MTA may be forced to implement a combination of extreme service cuts and fare hikes,” the MTA statement read. “The Payroll Mobility Tax remains in effect for now, and we expect that it will survive this legal challenge.”

Nassau has paid $9.9 million in MTA payroll taxes since its inception, while county business owners have paid roughly $80 million per year. The county plans to seek retroactive relief for funds it has paid since the law was enacted. It is unclear if the county will be able to seek similar relief on behalf of county businesses, officials said last Thursday.

Mangano said if the MTA successfully appeals, he would rule out challenging that ruling.

“We’ll analyze that,” Mangano said. “Again, we call on them to listen with both ears to the loud message here that goes beyond the decision.”

Reaction From Massapequa

Lawmakers and elected officials from Massapequa were pleased with the decision.

“The ruling that the MTA payroll tax is unconstitutional is a victory for Long Island taxpayers,” said State Senator Charles Fuschillo (R – Merrick). “Having strongly opposed this job-killing tax since its implementation by the Senate Democrats in 2009, and supporting its repeal in 2011, I am pleased that this latest positive step has been taken to alleviate this unfair and significant burden on businesses, municipalities, libraries and employers across Long Island. I applaud the court for its decision and reaffirming what my Republican colleagues and I have long been saying: that the MTA payroll tax is unfair, unjust, and should never have been implemented.”

“I’m very happy about it,” added Village of Massapequa Park Mayor James Altadonna. “As a former train rider and commuter, I feel that the MTA overstepped its bounds by taxing the people of Long Island. They need to run a tighter ship as we all do.”

Altadonna admitted that the loss of revenue would hurt commuters, but he said that the “easy thing to do is to raise the cost,” adding, “the hard thing to do is [for the MTA] to look at themselves and how to work within their own means.” The mayor said that any threat by the MTA to raise fares would be “unjust,” while further adding that the MTA needs to “look within the confines of the laws and not penalize the captive ridership.”

“I am very happy with the results of this decision,” added Assemblyman Joseph Saladino (R – Massapequa.) “I have long fought against this very unfair payroll tax and have been very successful so far in getting it repealed from most municipalities, all small businesses and from our public schools. When you tax these entities like public schools and municipalities, it drives up property taxes. We’ve been able to get that repealed and now I’m focused on repealing the MTA tax from our community colleges, from our libraries and from all municipalities to continue the cornerstone of my work as an assemblyman to stop the unfair taxes and the taxes that drive up the cost of living on Long Island.”

—-Joe Scotchie contributed to this article